Brokerage firm fee rebate - Taxable or not?

[FEDUKE404]

Client had personal investment account with Firm A. For various reasons, he decided to leave Firm A and requested transfer of all assets to Firm B.
Firm A charged $XYZ to close out the account and to effect the transfer of all assets to Firm B. (This does not involve a retirement account.)
Client has presented Forms 1099 packet from Firm B. As part of it, a Form 1099-MISC, line 3 entry in the amount of $XYZ appears. The notes with the tax document state "This transaction reflects a fee rebate, reimbursement or refund or other transaction paid to this account."
The account executive at Firm B has stated their company reimbursed their client what he had paid to exit Firm A. ("As soon as we got your money we gave you back the fee of $XYZ. . .I wouldn't think it was taxable."
Obviously this is a marketing ploy for Firm B.
In the presence of a Form 1099-MISC reporting an income amount, and the fact that Firm B paid for a fee separately charged by Firm A, I tend to feel it IS taxable.

Have any of you encountered this type scenario? Taxable or nontaxable??

FE

[Beersheba]

If the original brokerage fee was not deductible, then a rebate would not be taxable, it would appear.. And brokerage fees have not been deductible for a few years.

If you agree, I don't know how you deal with the 1099-MISC.

[Lion]

If your client resides in a state that decoupled from the feds, and you are entering Firm A's $XYZ, then I'd enter Firm B's -XYZ on the next line. It won't change his federal return, but you can point to the entries if your client gets a matching letter. Otherwise, put notes in his file and remind him to contact you immediately if he receives any government correspondence.

[FEDUKE404]

The fact that the "rebate" came from the new firm and the "fee charge" came from the old firm would seem to tilt the tables a bit.
Aside from the fact that the new firm has reported taxable income on their Form 1099-MISC.
Agree the client received taxable Form 1099-MISC income that was related to a non-deductible (in recent years, elimination of most 2% floor items) fee.
I guess it boils down to whether you see the funds from Firm B as an "incentive" or as a "rebate" of fees they never actually charged.